Traditionally, there have been two high-level archetypes for the CFO role — the strategic leader and the operational leader.
Each will largely hold the same responsibilities, but with different specialties. An operational CFO specializes in blending the data from functional departments with financial data to optimize performance. And historically, a “strategic” CFO would specialize more in forward-looking strategy, creating three-year and five-year roadmaps to execute the company’s vision.
But business needs and the finance function itself have evolved beyond the point where we can split the CFO archetypes this way. The modern CFO needs to be the leader of both strategic and operational finance excellence.
For any company, strong financial leadership is essential. But should you hire an operational finance leader focused on day-to-day accounting? Or a strategic one to guide high-level decision making? Understanding the differences between operational and strategic financial leadership is key.
As a business owner myself, I learned this lesson the hard way. When rapid growth stretched our internal finance team thin, I brought in a part-time CFO to help. But instead of providing strategic guidance, he dug into the weeds of daily transactions. It quickly became clear I needed someone focused on the big picture.
In this post, I’ll break down the key differences between operational and strategic financial leadership so you can decide which approach is right for your company.
Operational Financial Leadership
Operational financial leaders specialize in the nuts and bolts of accounting and finance. Typical responsibilities include:
- Overseeing day-to-day accounting like A/R, A/P, payroll, etc.
- Preparing financial statements and managing audits
- Ensuring regulatory compliance
- Managing cash flow and treasury functions
- Streamlining financial processes
The key focus is understanding how money flows through the company on a granular level. Operational leaders optimize accounting methods, controls, and accuracy.
Deep knowledge of your systems gives operational CFOs unique insights. For example, they can spot inefficient processes that waste money. Their hands-on expertise provides a reality check on the numbers.
Operational finance leaders are also well-suited to oversee major implementations like new accounting software They ensure the switchover is seamless while maximizing the system’s capabilities,
Strategic Financial Leadership
Strategic financial leaders take a big picture view. Typical responsibilities include:
- Forecasting future capital needs
- Evaluating growth opportunities like new products or markets
- Advising on mergers, acquisitions, and investments
- Securing funding and managing investor relations
- Identifying competitive threats and marketplace trends
The focus is using financial data to chart the company’s optimal path. Strategic CFOs partner with the CEO and leadership team to set long-term goals.
For example, a strategic CFO might assess entering a new region. They would estimate required capital expenditure, model expected ROI timeframes, and weigh competitive factors.
Strategic leaders are heavily involved in decisions that shape the company’s future. Their analysis informs high-stakes moves and investments.
Key Differences at a Glance
| Operational | Strategic |
|---|---|
| Day-to-day accounting | Long-term planning |
| Optimizing processes | Evaluating growth opportunities |
| Compliance and controls | Fundraising and investor relations |
| Efficiency | Competitive landscape analysis |
| Short-term | Big picture |
Which Type of CFO Does Your Company Need?
The right financial leadership approach depends on your company’s current stage and needs.
Scaling Startups
Early-stage companies need operational help. They are figuring out processes, tools, and financial controls as they scale. An operational CFO can optimize accounting and reporting systems to support rapid growth.
Once startups establish operational excellence, they may shift to strategic leadership. This helps activating new levers for growth like entering new markets.
Private Equity Portfolio Companies
PE firms often insert operational CFOs after acquiring a new company. They overhaul accounting methods, controls, and reporting to integrate the company.
Later, a strategic CFO may step in to identify opportunities for expansion, new revenue streams, or exit strategies. Their role is maximizing return on the PE firm’s investment.
Mature Companies
Established companies require a mix of operational and strategic leadership. The CFO enables expansion into new products and markets while maintaining excellent accounting practices.
Internal promotion is common. An operational controller may get promoted to strategic CFO after demonstrating business acumen.
Blending Operational and Strategic Approaches
While operational and strategic leaders have distinct focuses, blending both approaches has benefits:
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Operations context informs strategy: Leaders who understand operational realities will develop better strategies grounded in practical constraints.
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Strategy guides operations: Knowing the big picture strategy helps operational leaders prioritize tasks that have the most impact.
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Backup: Cross-training strategic and operational leaders provides backup. If someone leaves, the remaining CFO can cover critical areas until hiring a replacement.
Aim to cultivate finance leaders who can contribute insights at both the detailed and big picture levels. This creates a leadership bench that can flex as the company evolves.
Takeaway Tips
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Assess whether your company currently needs more operational or strategic financial leadership based on your growth stage and goals. Be honest about any gaps holding you back.
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When hiring a CFO, be clear whether you are seeking an operational or strategic finance leader. Evaluate candidate experience accordingly.
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Develop both capabilities within your finance team. Rotation programs are a great way to build generalist skills.
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Keep reevaluating as your company grows and priorities shift. An operational CFO may need to hand off to a strategic leader during rapid expansion.
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Retain operational expertise even after bringing on a strategic CFO. Don’t lose the critical nucleus who understands your systems inside out.
Strong financial leadership is invaluable for company growth and success. Understanding whether operational or strategic approaches (or both!) best fit your needs ensures you have the right financial talent.
What kind of financial leadership has been most helpful for your company? I’d love to hear your experiences in the comments below!
Numbers vs. the Big Picture
An operational CFO understands operations, financial statements, balance sheets, and the reporting standards the business adheres to. They’re guided by numbers.
In contrast, a strategic CFO examines past and current financial statements to gauge the company’s health and then plans for the future in collaboration with other executives.
In other words, strategic CFOs don’t simply rely on numbers. They look at the bigger picture and use the data to their advantage. They formulate strategies that’ll boost the company’s future financial health.
Lacks a Future-Focused Outlook
Operational finance leadership learns from the company’s past and focuses on its present. This focus on the day-to-day running of the business prevents it from visualizing the business’s future and the corresponding uncertainties and financial risks.
In other words, a company with operational finance leadership might struggle to prepare for long-term growth.
The 5 Musts for CFOs in 2023
What is the difference between a strategic CFO and an operational CFO?
They also understand the business’ financial operations, but their objectives are different from the operational CFO’s. When developing their strategies, a strategic CFO needs to be forward-thinking, while an operational CFO is concerned with past and present financial analysis.
What is the difference between operational Finance and strategic financial leadership?
Whereas operational finance has historically meant a focus on day-to-day financial operations across the business, traditional strategic financial leadership has focused on long-term planning. While this dichotomy doesn’t necessarily hold true anymore, it’s important to note the two primary differences between these traditional models.
What is operational financial leadership?
The main goal with operational financial leadership is to understand the operations of the company with the desire to improve overall efficiency and eliminate redundancies. Operational CFOs accomplish this by carefully reviewing each function within the company and identifying areas for improvement and cutting unnecessary expenses.
Is operational finance the key to a successful CFO?
Operational finance is an essential aspect of a successful CFO’s skill set. But mastering the operational side alone isn’t enough. You also need to wear your strategic leadership hat too and learn to balance both for maximum impact. But how?
